Mindfulness in marketing

An excerpt from the book ‘the Mindful marketer’; by Lisa Nirrel. URL bottom of page

This post is an excerpt from ‘The Mindful Marketer,”(Palgrave Macmillan, September 2014) by Lisa Nirell. Nirell is chief energy officer of EnergizeGrowth LLC. She has helped B2B companies grow customer mind-share and market share since 1983.

It was 1984, and the personal computer revolution was well underway. I was working for one of the world’s first commercially successful PC software companies, MultiMate International. We disrupted the word-processing industry by displacing stand-alone devices from now defunct companies such as Digital Equipment (DEC) and Wang. Will Jones, the CEO, was a fun-loving software genius at heart, and often roller-skated down the corridors of our converted warehouse offices to boost morale.

We doubled in size for several consecutive years and watched revenues soar. As the International Marketing Manager, I did my best to keep up the pace. In those heady days, the priority was closing business and selling as many licenses to my distributors as I could, not managing profit margins. I seldom communicated with the finance team — that was the VP of Sales and Marketing’s job. Instead, I spoke the language of publicity, marketing programs, events management, and managing channel partners.

During one summer afternoon in 1985, the business temporarily came to a halt when Jones sold MultiMate to Ashton-Tate and immediately laid off half of the company. While he shared the bad news with each employee, including me, he wore his roller skates, jeans, and a terribly loud and annoying bright yellow t-shirt. It bore a smiley face and the caption “Happiness is Positive Cash Flow.”

I quickly realized, at the ripe age of 23, that growth at any price had a cost, and consolidation was a necessary, yet ugly, part of the cycle of industry maturity.

I am probably not the only marketing person who has felt clueless in the face of a liquidity event. In my experience, finance fundamentals are often passed on through the school of trial and error, not through formal education. We slowly learn the basics, such as the most critical roles that a CFO must fulfill. These include controllership, financial planning and analysis (FP&A), information technology (IT) and human resources (HR) management, treasury (forecast cash and liquidity relative to short-term and long-term working capital; Accounts Payable management), and strategy (valuation drivers, relations with external advisers, investment bankers, attorneys, etc.). Sadly, that’s not enough for a mindful marketer to thrive, because the CFO role is changing.

Two pivotal shifts are affecting CFOs today, and will impact marketers in untold ways:

Trend #1: Finance has greater influence and authority over operations and IT. According to Gary Patterson, CEO of advisory firm Fiscal Doctor, Inc., “in companies ranging from 50M-$1B, today’s CFOs are expected to play the role of both COO [chief operating officer] and CFO, which is even more of a strategic position.” This means that your CFO may also be responsible for additional activities such as prioritizing a finite set of company resources, communicating the strategy across the company, implementing performance and recognition programs, and overseeing staffing levels and team incentives to fulfill the company’s requirements.

The CFO is also increasingly involved in overseeing strategic technology investments. CFO Innovation Asia reported in December 2013 that in some countries, organizations are also seeing finance gaining more control over IT decisions: “nearly 83% of respondents [in the Robert Half study are] citing a rise in collaboration between the IT and finance teams during the last three years — a sign that IT will be integrated into financial performance planning, and the lines between the IT department and finance will continue to blur as technology becomes the valued enabler, rather than the end game.”

Don Clarke, a seasoned CFO based in Washington, D.C., suggests that this is a trend whose time has come. He has advised CEOs for over two decades, and overseen multiple liquidity events and public offerings. In today’s economy, he finds that “the CFO role is morphing towards a key business partner to the CEO. They both share something in common, and are unique in that they have to worry about the whole ‘family’: developers, HR, IT, Sales, and Marketing.”

What are the implications for CMOs? The CFO will expect marketers to speak the language of numbers and strategy more than ever before. It will be harder to justify your marketing budget unless you are capable of explaining how those marketing investments will benefit other departments and your customers.

Trend #2: Marketing and sales incentive plans and IT investments will require different reporting standards. The International Financial Reporting Standards (IFRS) are gradually being deployed to help public companies implement one set of global accounting standards. The intent is to facilitate growth and make it easier for investors and global teams to review and understand financial statements. The Financial Accounting Standards Board (FASB) is the governing body. So far, public companies in the European Union (EU), Israel, New Zealand, Mexico, Canada, and Brazil have embraced the new standard. Once these standards are fully deployed in the United States, which is projected to happen in 2015, the accounting profession will face fundamental shifts.

CMOs have two options in this new IFRS scenario: to proactively work with their finance counterparts on a plan to adopt these new reporting standards into the marketing planning and budgeting cycles, or to watch what happens and respond hastily. The consequence of option two is further dissonance with finance.

It may take time for these trends to take hold in your organization. Until then, you can avoid these common measurement mistakes, which further alienate you from your finance team:

Jumping to hasty conclusions. Let’s say that you launch a new website, and you generate a marketing campaign to promote the new features and offers. Soon after launch, website traffic spikes significantly. Your analytics reports tell you that visitors are spending a significantly longer time on the pages you feature. According to Larry Freed, former CEO of ForeSee and author of “Innovating Analytics,” many of us would immediately conclude that our launch was a big success: “Is that page great, or is it problematic? Visitors may love the content, or they may be getting stuck because of a problem on the page.”

Relying too heavily on historical information. Freed continues by saying, “Many analytics programs are dominated by behavioral data. Behavioral data tell us what has happened, not what will happen. We may have visited, purchased, downloaded, registered, or whatever else the company is looking for us to do. Will we do it again? That depends on if our needs were met and we had a high level of satisfaction with the experience.”

Confusing feedback with measurement. Freed defines measurement as “a random sample of consumers that gives us data that are representative of the broader audience. Feedback is unsolicited by the company and either is direct from the consumer to the company, or indirect from the consumer via social networks. Since the feedback generated on social networks is very difficult to track, if not impossible, the most vocal naysayers may never be counted. Furthermore, your biggest fans may seldom provide you with unsolicited feedback. It is crucial to avoid the temptation to make wholesale changes to your marketing plan or product strategy as a result of limited customer feedback.

Gaming the system. The most common method that marketers use for gaming the system is to offer customers incentives to participate in your market research, and motivating employees to deploy strong-arm techniques to extract perfect satisfaction scores from their customers. I personally experienced the latter when I owned a Mercedes convertible. Within seconds of signing my service paperwork at the dealership, the service adviser said, “Our customer service team will be calling you to ensure you received 5-star service today. My team is given bonuses based on your scores. May I count on you to give us a perfect score?” I found this to be manipulative and perfunctory.

Freed advises us to “avoid incenting people to complete surveys, especially when there is no need. Never ask for personal data; some customers will decline to participate for privacy or confidentiality concerns. And try to prevent your staff from asking or begging their customers to give them good scores.”

What steps can a CMO do to earn more credibility with their CFO and fuel more innovations? In three words, financial language fluency.

Here are more detailed recommendations:

1. Bolster your competence around marketing planning and forecasting. This requires you to be transparent with the CFO. Here’s how. First, identify marketing on metrics that matter. Pick ones that align with your overall corporate objectives and the stage of growth your company is experiencing—not metrics that you think are “cool.”

I have often seen CMOs in start-ups track industry influencer coverage and new account revenues. Conversely, an established mid-market company may opt to track customer retention rates, pipeline velocity, customer wallet share, or brand repute. Your CFO usually reports on a broader set of metrics such as free cash flow, operating margins, revenue growth, and shareholder value.

Want to dazzle the CFO? Show them your anticipated spending plan for the next 90 days. This helps the CFO project cash flow, which is a particularly important topic for startups and fast-growth companies. Also, keep your progress reports consistent from one fiscal period to the next. This demonstrates that you have a good sense of what is happening in your organization.

2. Reinforce the term value creation, not marketing expense. While some activities in your integrated marketing plan will focus on short-term wins, brand development can often take five years to manage and measure. Educate your CFO on the importance of tracking both leading (behavioral) and trailing indicators (results) across the customer relationship spectrum. As a mindful marketer, you are a market maker, not an order taker.

In Figure 17.1, Freed offers a holistic model to capture a complete picture of your customers and the experience they are having at each point.

The fundamental elements of the Customer Experience Ecosystem include behavioral data, feedback or service data, observation, and the customer experience.

Agree with the CFO on what categories will be created for allocating funds.In a typical marketing plan, categories might include

global campaigns,

customer programs (advisory boards, reference account development),

content management,

marketing operations,

public relations,

analyst relations,

field marketing (if applicable),

brand advertising,

online marketing,

internal communications,

I am surprised by the number of CMOs who are expected to invest a percentage of their time in innovation, yet they fail to create an “innovation reserves” category in their annual budget. One CMO for a $2.5B firm whom I recently met does not have any such budget category. Consequently, whenever he wants to experiment with a new social media campaign or field marketing program, he is forced to withdraw those funds from his existing brand advertising budget. For companies that do not command the number one position among competitors, this can be a damaging to the brand and ultimately render their marketing initiatives stale.

Balance savings discussions with spending discussions. Have you ever benchmarked your agency and research investments against industry standards? How do you know whether you are spending too much for these services? In one instance, McKinsey & Company reported that a consumer packaged-goods company conducted a study of their spend on marketing research and TV commercial testing. They were surprised to learn that they were using more than 48 different marketing research firms, and spending 50 percent more than the industry average on research. Once they made the necessary adjustments, they were able to reallocate 20 percent of their marketing budget to growth initiatives.

Create ongoing collaboration opportunities with finance. One CFO from a rapidly growing business to business (B2B) company explains how two different CMOs behaved during planning meetings. The first CMO, whom we will call Barbara, became defensive when he asked for regular updates on her progress against the annual budget. The CFO noticed she was struggling with sticking to the budget, so he assigned a finance staff member (“Eric”) to help Barbara with the process. These individuals are often called Financial Planning and Analysis (FP&A) professionals. The CFO told me, “She treated my staff member as if he were beneath her, and exceeded her budget by a large margin. At that point, it felt like a forced marriage.”

Shortly after that interchange, Barbara left the company, and a new CMO joined their firm. (Let’s call him “Alan.”) Within the first few weeks of meeting the CFO, Alan told the CFO, “I want to work with your team to see where every dollar goes. I would like Eric to come to our marketing meetings and help me educate our marketers to be more comfortable with numbers … our top marketing goal is to drive leads to the sales team.” This gave the CFO a sense of relief and a greater commitment to marketing than he previously had.